Forced retirement age to be outlawed

Job contracts specifying a compulsory retirement age are to be outlawed under new legislation due to come into force in 2006.

Employment minister Margaret Hodge said that the change was part of a government push to give older people more choice about how long they stay at work.

Later retirement will soon become necessary if the British economy is to survive demographic changes which will see 40% of the workforce aged over 45 and just 17% under 25 within 10 years, she told the Commons Education and Employment Select Committee.

Acknowledging that, at 56, she had a personal interest in the issue, Ms Hodge told the committee: "We are all more energetic, we are all fitter and are going to live longer and be a larger part of the labour market, and the world, including the labour market, has got to change in recognition of that.

"Things like traditional retirement ages have to be thought through and modernised."

A working party bringing the Government together with employers, unions, representatives of the elderly and anti-discrimination campaigners will meet for the first time within a few weeks to discuss a proposed bill designed to end discrimination on the basis of age, said Ms Hodge.

The legislation in Westminster will be co-ordinated with the introduction of a European Union directive outlawing age discrimination, but Ms Hodge denied that the Government had been prompted into action by Brussels, saying that the two initiatives had developed simultaneously.

As well as later retirement, the working party will look at means of making "phased retirement" possible, by allowing senior workers to move down to less demanding posts as they near the end of their careers without losing pension benefits as a result.

For instance, headteachers who had "burnt out" after 10 years in the high-stress job might want to return to the classroom, but have previously been deterred by the fear of reduced pension entitlements, said Ms Hodge.

The group would also seek to find ways to make it easier for older people to combine work with voluntary activities, further education and caring.

She added: "Our purpose will be to try to ensure choice and flexibility for the individual, so any discrimination that arises from a whole range of practices will have to be looked at, one of which will be the contractual retirement age imposed by employers.

"Compulsory retirement based on age would only be possible where it is objectively justified.

"It is an outrage that we are not making the best use of the widest pool of talent by ensuring that people have the opportunity to participate in the labour market whatever their age."

Employment rates among men aged 50-65 had plummeted from 84% in 1979 to 67% in 1997, rising slightly since Labour came to power to 69%, partly as a result of the New Deal for Over-50s, said Ms Hodge.

The trend was less pronounced among women, as there had been a general increase in the female workforce over that time.

"Demographic changes in the labour market mean that the economy will not survive without using the talent and experience of older workers," said Ms Hodge.

"If we do not break down the cultural attitudes about older workers, then the economy is in trouble."

The Government's director of employment policy, Michael Richardson, told the MPs that the EU directive would not affect the age thresholds for National Insurance payments or state pension eligibility.

But the working group will have to thrash out how occupational pensions would be affected by employees choosing to work on past 65.

Ms Hodge stressed that there was no statutory retirement age at present, and none would be brought in under the new legislation.